Legal & General Group plc Capital Markets Event December 2016
Forward looking statements
Introduction Nigel Wilson
Capital markets event objectives Ambition: to repeat operating performance achieved in 2010-2015 in 2015-2020
Agenda 15.00 15.10 15.10 15.25 15.25 15.40 15.40 15.55 15.55 16.05 16.25 16.45 16.45 17.00 17.00 17.20 17.20 17.25 17.25 17.45
Our vision and equity narrative
TRADITIONAL DIVISIONS ASSET GATHERING DIVISIONS We are a focused, high performing business DIVISIONS H1 2016 OPERATING PROFIT ALLOCATION 1 m % MARKET PERFORMANCE LGR 406 43 LGIM 171 18 LGC 135 15 Total 712 76 LGI 150 16 General Insurance 31 3 Savings 49 5 Total 230 24 Group 942 100
We are a focused, high performing business aligned to key long term structural growth drivers GROWTH DRIVERS OUR CAPABILITIES CONTINUED PROGRESS GLOBAL DEMOGRAPHICS RETIREMENT SOLUTIONS LGR ASSETS INCREASED FROM 28BN in 2011 TO 51BN IN H1 2016 GLOBALISATION OF ASSET MARKETS INTERNATIONALLY REPLICABLE MODEL LGIM AUM GROWN FROM 204BN IN 2005 TO 842BN IN H1 2016 CREATING NEW REAL PRODUCTIVE ASSETS DIRECT INVESTMENTS DIRECT INVESTMENTS TARGET OF 15BN BY 2020 TO DATE: 10BN REFORM OF THE WELFARE STATE BEVERIDGE 2.0 UK DEFINED CONTRIBUTION ASSET GROWTH FROM 24BN IN 2011 TO 50BN IN H1 2016 TECHNOLOGICAL INNOVATION DIGITAL BUSINESS AND CONSUMER SOLUTIONS LOW COST OPERATING MODELS (BACK END) CONSUMER ENGAGEMENT MODELS (FRONT END) PROVIDING TODAY S CAPITAL INVESTING DIRECTLY OR THROUGH PARTNERSHIP PRECISION BUILT HOUSING SME DEBT AND EQUITY FINANCING LONG TERM INFRASTRUCTURE INVESTMENT DRIVING SUSTAINABLE EARNINGS AND DIVIDEND GROWTH
Key financials: strong growth, attractive returns Our ambition is to repeat a similar operating performance in 2015-2020 Current FY forecasts has net cash generation at c 1.4bn 2011 2012 2013 2014 2015 2016 Consensus* H1 2015 H1 2016 NET CASH GENERATION ( m) 846 865 1,002 1,104 1,256 1,335 629 727 DIVIDEND PAID ( m) 298 394 479 580 701 830 205 238 NET CASH GENERATION RETAINED ( m) 548 471 523 524 555 502 424 489 COVERAGE 2.84 2.20 2.09 1.90 1.79 1.60 n/a n/a RETURN ON EQUITY (%) 14.9 15.4 16.1 16.9 17.7 1 n/a 19.1 2 20.4 3 EARNINGS PER SHARE (p) 12.42 13.84 15.20 16.70 18.58 1 21.3 9.79 2 11.20 3
De-cluttering our business has increased focus
Focused on high returns from a position of strength STRONG GROWTH OPPORTUNITY IN EACH DIVISION UNDERPINNED BY: Balance Sheet Strength Growth Opportunities Strong Shareholder Returns
Balance Sheet Mark Gregory & Garvan O Neill
Balance Sheet: What we will cover today Solvency II Our thinking Emergence of surplus Ability to support growth and dividends Robust balance sheets H1 2016 experience downgrade sensitivity Liquidity Key considerations
Strong Solvency II capital position CAPITAL POSITION CAPITAL POSITION COVERAGE RATIO 230% 235% 169% 158% 175% 163% OWN FUNDS 13.5bn 14.0bn 13.5bn 14.3bn 12.9bn 13.7bn 14bn 12bn 7.6bn 8.1bn 5.5bn 5.3bn 5.5bn 5.3bn 10bn 8bn 6bn 4bn 5.9bn 5.9bn 8.0bn 9.0bn 7.4bn 8.4bn 2bn 0bn YE 2015 H1 2016 YE 2015 Proforma ECONOMIC CAPITAL H1 2016 Proforma SOLVENCY II YE 2015 Shareholder basis H1 2016 Shareholder basis
Solvency II: New business growth and dividends well covered Expected Operating Surplus Existing Business 2016 F bn 1.25 Comments Operating Surplus New business (0.15) Net Surplus 1.10 Dividends paid (0.83) Market Movements Other Movements Total Surplus over year
Annuities: investment quickly recouped, limited new business strain FY FORECAST 2016 NEW BUSINESS ANNUITIES CAPITAL POSITION 120m Payback period 4years 80m 40m 0m 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40-40m - 80m - 120m H1 2016 LGR margin 10.2% - 160m - 200m
New UK Protection business creates a day 1 Solvency II surplus FY FORECAST 2016 NEW BUSINESS UK PROTECTION OTHER BUSINESSES BUSINESS SOLVENCY II APPROACH LGA LGIM LGC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Group diversification further enhances capital efficiency FY FORECAST 2016 NEW BUSINESS TOTAL GROUP CAPITAL POSITION 120m Payback period 3 years 80m 40m 0m 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15-40m - 80m - 120m - 160m
Beyond 2016: delivering new business growth and progressive dividend policy in a Solvency II world In-force insurance business: substantial, long term, surplus releases New business: investment quickly recouped, limited strain LGIM and LGC: growing contribution as asset base increases Target to deliver progressive growth in Solvency II net surplus (mid to high single digit %) New business growth and progressive dividend policy both being delivered in a Solvency II world
Strong Solvency II and IFRS balance sheet IFRS FY 2015 bn H1 2016 bn Net Equity 6.4 6.6 SOLVENCY II Surplus* 5.5 5.3 SOLVENCY II CAPITAL* H1 2016 bn Core Tier 1 (Equity) 11.0 Other Tier 1 (Debt) 0.6 Tier 2 (Debt) 2.2 Deductions (0.1) Eligible Own Funds 13.7 Capital requirement 8.4 Surplus 5.3
Debt profile HYBRID DEBT REDEMPTION PROFILE 1 2016 2017 2018 2019 2020 2021 2025 2031 2032 2033 2044 MOODY S ADJUSTED LEVERAGE RATIO BELOW 30% IN LONG TERM
H1 2016 experience and management actions 2016 ECONOMIC INDICATORS 300% Swap Curve Levels YTD Barclays Sterling Corporate 10 to 15 Avg OAS 2.4 200% 1.9 1.4 100% 0% 2 15 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% YTD USD vs GBP FX Moves 20% 10% 0% -10% -20% YTD FTSE 100 Total Returns
Balance sheet sensitivity scenario: downgrade event Sector H1 2016 Group Exposure ( bn) AAA AA A BBB BB or below Total Other bn % Sovereigns 1.5 8.1 0.2 0.4 0.1-10.4 19 Banks 0.5 0.9 1.5 0.4 - - 3.3 6 Other Financial Services/Insurance 0.1 1.2 2.4 0.7 0.2-4.5 8 Utilities 0.1 0.1 4.2 3.1 - - 7.5 14 Consumer Goods & Healthcare Others 1 1 Others 2 1 0.2 1.2 2.5 2.7 0.2-6.9 13 Total bn 2.8 15.3 17.9 16.7 2.3 0.2 55.2 2 100 % 5 28 32 30 4 - Bonds downgrade stress: 3 notch downgrade on 20% of bonds Solvency II impact ( bn) (0.8) Coverage ratio impact (%) (9)
Monitoring liquidity in the Group 4 CONSIDERATIONS Current position Keeping it topped up Hygiene FREE LIQUIDITY INTERNAL CASH GENERATION FOR DIVIDEND SII SURPLUS EMERGING - CASH IFRS NEAR CASH
Risk Management Simon Gadd & Anton Eser
Risk Management: What we will cover today Group Risk function Risk profile Managing Risk Annuity Portfolio management Investment philosophy and process Current portfolio Role and responsibilities Risk types SCR exposure ALM risks Liquidity risk management Longevity Mortality and morbidity Monitoring the environment Global Fixed Income Real Assets Long term themes Sector and regional allocation Bottom-up credit research Split by sector, credit rating and domicile
Role of Risk Management Group CRO Market Risk Credit Risk Insurance Risk Operational Risk Conduct Risk Strategic Risk Emerging Risk LGR LGI LGC LGIM Savings
Risk Profile RISK TYPES CATEGORIES APPETITE DIVISION SCR RISK EXPOSURE Equity, spread and property MARKET 3 CREDIT Interest rates and inflation Currency Bond default Property lending counterparties Banks & financial instruments Reinsurance counterparties Longevity, mortality & morbidity INSURANCE Life catastrophe Persistency/ expense LIQUIDITY Contingent events OPERATIONAL & CONDUCT People, process, systems, events
Market risk CASHFLOW MATCHING -3,000-2,000-1,000 0 1,000 2,000 3,000 4,000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 2052 2053 2054 2055 2056 2057 2058 2059 2060 2061 2062 2063 2064 2065 2066
Longevity, mortality and morbidity PRODUCT 2015 CLAIMS UK Workplace Protection US Term Assurance Retail protection - Life Retail protection - Critical Illness Retail protection - Terminal Illness
Continuing to monitor the environment
Annuity Portfolio Management Draws on resources across Public and Private credit Global Fixed Income Real Assets Other Euro credit US Credit Global fixed income AUM 125bn Private Real Credit Estate Sterling credit
Annuity Portfolio Management Ensure stable through-the-cycle returns Global fixed income AUM 125bn
Investment philosophy and process Long term themes Bottom-up credit research Global fixed income AUM 125bn Macro-thematic investment process provides guidance for top-down positioning and bottom-up stock selection Long-term strategic themes Risk allocated by sector and region Fundamental credit analysis
Current portfolio HIGHLY DIVERSIFIED PUBLIC AND PRIVATE CREDIT PORTFOLIOS* SECTOR PUBLIC m PRIVATE m TOTAL m TOTAL % Sovereigns, Supras and Sub-Sovereigns 8,765 8,765 17.2 Banks - Senior 2,064 2,064 4.1 - Subordinated 445 445 0.9 Financial Services 3,301 3,301 6.5 Insurance 988 988 1.9 Utilities 7,281 7,281 14.3 Consumer Services and Goods 4,357 4,357 8.6 Health Care 1,946 1,946 3.8 Technology and Telecoms 3,048 3,048 6.0 Industrials 2,979 2,979 5.9 Oil and Gas 2,336 2,336 4.6 Property 1,891 4,200 6,092 12.0 Asset backed securities 1,314 1,314 2.6 Infrastructure / PFI / Social housing 433 1,196 1,629 3.2 Secured Bonds 468 704 1,172 2.3 Whole Business Securitised 817 90 907 1.8 Lifetime mortgage loans 440 440 0.9 CDOs** 1,102 1,102 2.2 Other*** 700 700 1.4 Total m 44,676 6,189 50,866 100 Total % 87.8 12.2 100 1 2 3 4 5 By Credit Rating By Domicile
Legal & General Insurance Bernie Hickman & John Hyde
Legal & General Insurance: What we will cover today Overview Key financials Digital innovation Shared expertise Summary Internationalising LGI by leveraging UK expertise to the US & beyond Cash and profits rebased Capital contribution from Retail Protection Retail Protection competitive advantages Evidence of benefits of digital Acceleration of growth in the US Delivering growth
Internationalising LGI by leveraging UK expertise to the US & beyond HY 16 OPERATING PROFIT CONTRIBUTION 1 UK & US PROTECTION GROSS PREMIUM Combined MARKET SHARE across UK RP, UK GP and US total term converting all markets to $ OVERVIEW OF LEGAL & GENERAL INSURANCE CUSTOMER MARKETS CUSTOMER NEEDS COVERED: LIFE INSURANCE, CRITICAL ILLNESS COVER, INCOME PROTECTION
Cash and profits rebased; Important capital contribution from Retail Protection FINANCIAL HIGHLIGHTS H1 2016 H1 2015 FY 2015 UK PROTECTION 2016 F OPERATING PROFIT
Digital innovation has created Retail Protection competitive advantages STRONG & DIVERSE DISTRIBUTION* 100% 80% 60% 40% 20% 0% EXCELLENT POINT OF SALE DECISION RATES +21% 80% 59% 2010 2016
Low cost, scalable business model REDUCING REINSURANCE PREMIUMS REFLECTING RISK MANAGEMENT EXCELLENCE 10 8 6 4 2 0 10.2 LOW IN-FORCE UNIT COSTS ( ) 8.9 8.2 8.5 8.1 6.4 5.9 2010 2011 2012 2013 2014 2015 H1 2016
Our shared expertise will accelerate growth in the US LEGAL & GENERAL BUSINESSES ARE WELL ESTABLISHED AND INTEGRATED SIGNIFICANT OPPORTUNITY FOR MARKET GROWTH US INDIVIDUAL TERM MARKET* Legal & General LGR America Legal & General America LGIM America APE $2,236m Rest of Market LEGAL & GENERAL AMERICA 1m policyholders; $1.2bn GWP Provides admin, payment services and a balance sheet for LGRA and back office support for LGIMA LGIMA is an asset manager for LGA DIGITAL DIRECT OPPORTUNITY c75% of US consumers research insurance online** but only 5% buy online** Fully digital life insurance currently under-developed Digital transformation is underway
Delivering growth through a diverse, digital and global insurance division UK RETAIL PROTECTION UK GROUP PROTECTION LEAD & LEVERAGE REFOCUS & REBUILD DIGITISATION & DISTRIBUTION EXPERTISE US PROTECTION DIGITISE & DIVERSIFY UK, US & BEYOND
General Insurance: New distribution agreements to deliver premiums growth FINANCIAL HIGHLIGHTS H1 2016 H1 2015 FY 2015 Global fixed income AUM 125bn GROSS WRITTEN PREMIUMS
Legal & General Group plc Capital Markets Event December 2016
Our unique investment business model: capturing maximum value LGR 51BN LGIM 842BN Early stage investment Development Asset creation Ownership Management LGC 6BN Delivering economically and socially valuable solutions to benefit customers, investors and society LGIM LGR LGC The illiquidity of our liabilities and our asset expertise allows us to create unique investment opportunities
Legal & General Investment Management Mark Zinkula & Aaron Meder
Legal & General Investment Management: What we will cover today What we deliver The growth opportunity Diversifying our approach Core strength in UK DB Opportunities in DC and retail Our global expansion Consistent strong financial results Outperforming our peers Well placed for future growth Gaining market share Strong clientfocused culture Investment excellence Adapting our solutions approach across channels and regions Largest UK DB pension asset manager Outcome orientated DB pensions solutions journey with our clients 15% DC market share Strong DC client growth Repositioning the retail business Expanding internationally Continued strong growth in US business
Revenue & Expenses ( m) C/I Ratio Consistent strong financial results 800 600 400 200 0 REVENUE GROWTH WITH A STEADY MARGIN Revenue growth 13% 2010 2011 2012 2013 2014 2015 100% 80% 60% 40% 20% 0% FINANCIAL HIGHLIGHTS H1 2016 FY 2015 FY 2010 CAGR % Operating profit ( m)* 171 355 206 11% Total revenue ( m) 353 694 378 13% Total expenses ( m) (179) (335) (172) 14% Closing AUM ( bn) 842 746 354 16% International AUM ( bn) 152 122 26 37% DC AUM ( bn) 50 46 19 19% Retail AUM ( bn) 21 20 12 11% Cost:income ratio 50 48 46 1%
Outperforming our peers AUM TREND REVENUE TREND 300 300 250 250 200 200 150 150 100 100 50 50-2007 2008 2014 2015 0 2007 2008 2014 2015 PROFIT TREND NET FLOWS TREND 300 250 200 150 100 50 0 2007 2008 2014 2015 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 2007 2008 2014 2015
$tr bn Well positioned for future growth STRONG GROWTH AGAINST SLOWING GLOBAL AUM STRUCTURALLY WELL POSITIONED TO CAPTURE FUTURE GROWTH 200 180 160 140 120 100 80 60 40 20 29 114 12% LGIM growth 21% Global growth 52 297 5% 43 13% 264 694 1% 7% 71 71 746 800 700 600 500 400 300 200 100 Alternatives Active specialities Solutions Index Active core Global AUM 23% 8% 51% 42% LGIM AUM 2% 9% 45% 38% 0 2002 2007 2008 2014 2015 0-24% 6%
Diversifying solutions approach across channels and regions 1. CULTURE & CLIENT SERVICE 2. INVESTMENT EXCELLENCE 3. SOLUTIONS APPROACH 55% 88% 46% Core strength in pensions Diversify by channel (UK Ext AUM bn) Diversify by region (Global AUM bn) 25 27 UK (82%) 100 US (12%) Gulf & Asia (3%) 690 Europe (3%) 11% of UK Ext AUM in DC & Retail 18% of Global AUM is international
1. Culture & client service: putting our clients first Strength and depth in our client teams Established long term relationships Consistently high client service scores 120 55% 90% 265 65% TOP QUARTILE 650 90% TOP QUARTILE
2. Investment excellence: generating strong performance Percentage of funds outperforming 1 Year 3 Years 5 Years Index Within fund specific tracking target 97% 100% 98% Active Fixed Income Above benchmark 82% 88% 79% Active Equity Above benchmark 40% 89% 89% Property Above benchmark 60% 78% 78% Active LDI Above liability benchmark 90% 100% n/a Multi-Asset Above benchmark 85% 100% n/a 88% Average active outperformance over three years
3. Solutions approach: investment tailored to our clients objectives Objective driven investment solutions GROWTH LGIM - 842bn of assets under management* MATCHING Index 300bn Active Equity 8bn Active Fixed Income (incl. LGR annuity assets) 126bn Solutions 389bn Real Assets 18bn L&G buy-in & longevity insurance Transitions c 40bn p.a. Design Manage Execute
Core strength in UK Defined Benefit pensions UK DB PENSION SOLUTIONS JOURNEY Funding level 62% Equities Credit Gilts DGFs Smart Beta Multi-Strat Credit LDI with leverage DGFs Buy and Maintain Infrastructure / Real Assets LDI (13% Growth rate 2015-16) Buy-out c. 2.1trn buy-out liabilities Time MARKET BENCHMARK OUTCOME ORIENTATED SELF SUFFICIENCY INSURANCE 32% 44% 15bn+ 3,000 Market share: Largest UK DB pension asset manager Market share: Largest UK LDI manager Our commitment to invest in real assets Pension schemes: we pay over 1m pensions p.a.
Continued growth in DC pensions and a repositioned Retail business DC AUM and AUA growth ( bn) DC client growth Retail AUM ( bn) 60 50 40 AUM growth 18% 8000 7000 6000 5000 6944 30 20 10 0 28 34 41 6 8 11 46 50 15 17 2012 2013 2014 2015 H1 2016 DC Assets DC AUA 4000 3000 2000 1000 0 2153 473 2044 2012 2013 2014 2015 H1 2016 DC schemes DC customers (' 000s) 15% 12% 80% UK DC Market share Growth forecast for UK DC market Projected DC AUM in Bundled by 2025 c7,000 Pensions and administration services to schemes Top 5 Top 10 Net retail sales per quarter Total Retail AUM
Successfully expanding internationally with growth in all regions US AUM ( bn) and client growth Non US international AUM ( bn) 200 175 150 125 100 75 50 25 0 183 46 2012 2013 2014 2015 H1 2016 Index Fixed Income/Solutions Clients US net flows ( bn) Non US international net flows ( bn) 10 5 0 8 5 2 3 4 2012 2013 2014 2015 H1 2016
Key priorities: our strategic markets account for over c 19trn of AUM c 0.3trn c 1.6trn c 1trn c 16trn
Legal & General Capital Paul Stanworth & Laura Mason
Legal & General Capital: What we will cover today What we do What we deliver The growth opportunity The LGC platform Our future Our purpose Our processes New asset classes Sources of profit Synergies with the Group Flow of assets Size of the UK Funding gap Which sectors we focus on Our portfolio Our team Our partners Our approval processes Multiple sources of profit Leading business position in housing and regeneration
Overview What we do How we do it Acquire asset Partner Develop Sell Internal External
What we have achieved so far 2013 2014 2015 2016
Balancing cash generation and profit delivery H1 2015 H1 2016 FINANCIAL HIGHLIGHTS Direct Investments Traded Treasury TOTAL Direct Investments Traded Treasury TOTAL YOY GROWTH (%) 778 3,382 621 4,781 1,064 3,833 1,021 5,918 24% 32 79 4 115 68 59 8 135 17% 3 0 (7) (4) (17) 75 2 60 35 79 (3) 111 51 134 10 195 75%
Scaling up opportunities LGC ASSET EXPOSURE (%) Strategic investment in direct investments 3% 17% 9% 5.9bn* 6% 65% Long term returns
UK Real Asset opportunity LONG TERM CAPITAL FUNDING REQUIREMENT Pension Funds 1.3trn Housing 150bn Insurance Funds Sovereign Wealth Funds 900bn 4.8trn Finance Gap Regeneration Clean Energy Transport 100bn 40bn 90bn REDUCED CAPACITY SME Finance 125bn Banks Governments
Delivering into global asset shift Allocations into Real Assets by Investor Type
Strong business model
Delivered solutions in every sector HOUSING SME FINANCE Idea Delivery Idea Delivery INFRASTRUCTURE INFRASTRUCTURE Idea Delivery Idea Delivery
Top Direct Investments Counterparty Sector Year of investment Book value* m
Experienced team, strong corporate governance Dedicated Specialist Investors All transactions LGC Board Approval Investment team MD approval LGC CRO + 3 Energy + 3 Property + 4 Asset Management + 6 Housing + 2 Construction Group Exec Approval CEO approval (GCC) Group CRO + 2 Financial Services Support + 10 Financial Accounting + 3 Actuarial + 7 Back Office + Group Legal + Group Risk Group Board Group Board Group Risk Committee Large transactions
Clear synergies with the L&G Group Example: Central Cardiff mixed-use redevelopment scheme Sep 2015 1 2 LGC LGR 3 LGC LGIM 2017 and beyond 4 5 LGIM LGC LGR LGIM
Creating multiple sources of profit growth Multi-tenure Housing business Top 10 UK Housing Provider Leading Infrastructure Business Leading investment in 10 UK Cities New Generation Energy business Generate 5% UK clean energy Leading SME Finance business Drive 10bn SME investment
Legal & General Retirement Kerrigan Procter & Chris Knight
Legal & General Retirement: What we will cover today What we do What we deliver The growth opportunity The impact of Solvency II How we have responded to Solvency II Our global expansion Our history Our markets Our competitive advantages 8 sources of profit Profit growth Size of the UK PRT opportunity Our unique positioning to capture this opportunity Solvency II new business strain Solvency II value margin Longevity Reinsurance Asset management and asset sourcing Our global reinsurance hub L&G Re US expansion
Helping customers achieve financial security in retirement MARKET LEADING RETIREMENT BUSINESS Operating Profit ( m) H1 2016 FY 2015 Legal & General Retirement (LGR) 406 641 OUR MARKETS ABOUT LGR COMPETITIVE Share ADVANTAGES GLOBAL PENSION RISK TRANSFER Entry 1987 UK INDIVIDUAL ANNUITIES Entry 1997 UK LIFETIME MORTGAGES Entry 2015 28% 1 UK only 7% 26% BALANCE SHEET SCALE TO SELF-FUND NEW BUSINESS GROWTH 30 YEARS OF LONGEVITY EXPERTISE AND DATA GROUP SYNERGIES RELSTIONSHIPS WITH ALMOST 50% OF UK PRIVATE SECTOR DB PENSION CLIENTS
Delivering 8 sources of profit and record profit growth SOURCES OF PROFIT OPERATING PROFIT 32% CAGR FY12-FY15 (1) Back Book for Cash & Capital (2) Back Book Acquisitions (3) UK Capital- Efficient Front Book (4) Longevity Insurance (5) US Pension Risk Transfer (6) Global Reinsurance Hub (7) Individual Retirement (8) Lifetime Mortgages 281m 310m 428m 641m** 406m 2012 2013 2014 2015 H1 2016 LGR UK PRT MARKET SHARE ASSET GROWTH 14% CAGR FY12-HY16
UK PRT: a growth opportunity SIGNIFICANT DEMAND FOR PRT SOLUTIONS L&G UK PRT MARKET SHARE OF 27% SINCE 2007 2.1trn UK DB liabilities 1, only 5% 2 transacted to date 2/3 of large pension plans plan to use PRT in the next 5 years 3 >1,000 pension plans overfunded on an s179 basis prime for PRT 4 Total UK pension scheme exposure to LDI 741bn 5 LEGAL & GENERAL INVESTMENT MANAGEMENT Index Active Fixed LDI & multiasset funds Longevity insurance Buy-in Buy-out Index LGIM ASSETS LEGAL & GENERAL RETIREMENT LGR LIABILITIES bn 6 300.4 125.8 7 389.1 8 6.0 9 32.0 2006 2007 2007 2014 ( 2.5bn) 2007 2016 ( 1.1bn)
Financially attractive business IFRS NBS SOLVENCY II NBS = LOW TO MID SINGLE DIGIT TYPICAL PRT DEAL Premium minus Best Estimate New Business Surplus Old Solvency 1 model Longevity reinsurance Higher quality asset portfolio New Capital Efficient model EEV VERSUS SOLVENCY MARGIN
Superior longevity science intellectual property LONGEVITY EXPERTISE ABOUT LGR COMPETITIVE ADVANTAGE DEDICATED TEAM OF 25 EXPERTS PRT LONGEVITY DATA FOR 16.2M PERSON YEARS Total Years >30 # lives 4.7m # person years in last 5 years 16.2m MARKET LEADING PRT LONGEVITY EXPERTS EXTENSIVE LINKS TO RESEARCH STANDARDISED MORTALITY RATIO, ENGLAND & WALES, 2000-2011 TREND 1 ACTUAL VERSUS EXPECTED EXPERIENCE CURRENTLY POSITIVE Blip or trend?
Actively managing our exposure through reinsurance IN-FORCE LONGEVITY EXPOSURE AS AT H1 2016 SUFFICIENT CAPACITY Asset x2 Immediate Annuity longevity x6 x1 x1 x3 x2 Deferred Annuity longevity EXTENSIVE AGREEMENTS IN PLACE Longevity Asset
Robust asset portfolio 51BN LGR ASSET PORTFOLIO AS AT H1 2016 with high sectorial diversification SECTORAL ANALYSIS AS AT H1 2016 BB or Other below assets AAA BBB By Credit Rating AA 51bn LGR asset portfolio A By Domicile
Direct Investments delivering enhanced value LEGAL AND GENERAL DIRECT INVESTMENTS DI PORTFOLIO - 8.2bn (AS AT SEPT 2016) CHARACTERISTIC REQUIREMENTS
High quality Direct Investment portfolio PORTFOLIO STATISTICS (AS AT SEPT 2016) DI PORTFOLIO ( MV SEPT 2016 ) * 38% 5% 5% 22% AAA AA A BBB 31% Sub IG Asset Classification Counterparty Sector % of Portfolio Internal Rating Term to Maturity Commentary 1 2 3 4 5 6 7 8 9 10
Investing long term money to grow the UK economy
Investing long term money to grow the UK economy
Lifetime mortgages providing another important source of direct investments HUGE GROWTH OPPORTUNITY PRUDENT LENDING CRITERIA
Replicating our model globally GLOBAL OPPORTUNITY USA 2 $3.2trn, only 4% transacted to date OUR OPERATIONS LGR AMERICA EXECUTING ON THE OPPORTUNITY Canada, Netherlands & Other European 1 $2trn L&G RE
Conclusion Nigel Wilson
Conclusion
Legal & General Group plc Capital Markets Event December 2016
Appendix 1: Group dividend policy DIVIDEND 13.40p 11.25p 9.30p 7.65p 6.40p 4.74p 5.69p 6.90p 8.35p 9.95p 1.66p 1.96p 2.40p 2.90p 3.45p 4.00p 2011 2012 2013 2014 2015 H1 2016 LEGAL & GENERAL GROUP PLC HALF-YEAR RESULTS AUGUST 2016